Question

1. Teacher salaries represent about 80% of the costs of running a school while airline pilots represent about 10 % of the costs of running an airline. How does this difference in input shares affect the demand curves for teachers versus pilots?

Answer 1

As salary of teachers are just 80% of tital cost while salary of pilots are 10% of total cost. It means that if teachers demand more salary, school management would not be able to pay so and can let go some of the teachers which will even not affect much of school business because there are plenty of teachers available in the market. On the other hand, if pilots desires more salary, airlines cannot fire pilots because there are not much pilots available in the market. It makes demand of techers elastic while demand of pilots is inelastic.